Suppose the Government Has a Budget Surplus of $2 Billion

question 176

Multiple Choice

Suppose the government has a budget surplus of $2 billion.If there is no Ricardo-Barro effect, what occurs?

• A) The supply of loanable funds curve shifts rightward, lowering the interest rate, and increasing investment.
• B) The demand for loanable funds curve shifts rightward, raising the interest rate, and increasing investment.
• C) The supply of loanable funds curve shifts leftward, raising the interest rate, and decreasing investment.
• D) The demand for loanable funds curve shifts leftward, lowering the interest rate, and decreasing investment.
• E) The supply of loanable funds curve shifts leftward, lowering the interest rate, and increasing investment.

---

Definitions:

Elastic

A term often used in economics to describe a situation where the demand for a product or service significantly changes in response to a change in price.

Pricing Strategy

An approach businesses use to set the prices for their products or services, based on costs, market demand, competition, and other factors.

Marginal Revenue

The change in total revenue that results from selling one additional unit of product.

Robinson-Patman Act

A United States federal law that prohibits anticompetitive practices by producers, specifically price discrimination.